Podcast Center
Video Center
Webcasts
Resource Center
Events
July 07, 2016 at 05:52 AM
(Bloomberg) – U.S. life insurers may boost bets on junk bonds as regulators consider easing capital charges on some of the assets, according to a CreditSights Inc. report.
“Yields are basically at record lows, and then you apply the change” in capital standards, Rob Haines, an analyst at CreditSights, said Wednesday in an interview. “That’s a lot of incentive for insurers to chase yield at the lower end of the rating spectrum.”
Insurers are struggling to generate satisfactory investment income as central banks suppress rates to stimulate economic growth, and events such as the U.K.’s Brexit vote send U.S. Treasury yields tumbling. That’s weighed on the industry’s stocks, sending the S&P 500 Life & Health Insurance Index slumping 11 percent since Dec. 31 while the S&P 500 Index gained 2.5 percent this year as of 12:57 p.m. in New York.
Insurers have scaled back from hedge funds after being burned by losses on the holdings, which are also subject to strict capital rules. That leaves assets such as private equity, real estate and junk debt as alternatives to counter the low yields available on the safest bonds.
